NZ mobile firms in secret deals

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Mobile phone companies Telecom and Vodafone are offering
last-minute secret deals to the New Zealand Government to slowly
reduce some of their wholesale charges to fend off regulation.

The two are facing regulation of these charges - known as mobile
termination rates - by Telecommunications Commissioner Douglas
Webb, to drive down the high cost of calling from a landline to a
mobile phone.

New Zealand is the second dearest country for mobile calls among
developed nations, according to the Organisation for Economic
Cooperation and Development.

Mobile phone users would not know till about the end of the year
when the cost of calling from a landline to a mobile phone would
fall significantly.

The regulation would apply only to landline-to-mobile calls but
Communications Minister David Cunliffe believes it will also flow
through to cheaper mobile-to-mobile calls.

"It means the cost of phone calls from a landline to a mobile
phone or from one mobile phone to another are going to drop one way
or the other."

Mr Cunliffe did not approve Mr Webb's recommendation in June to
regulate the termination rates. Instead he asked Mr Webb to
consider the confidential commercial deals being offered by Telecom
and Vodafone alongside Mr Webb's recommendation to regulate.

The trade-off is that Telecom and Vodafone's deals would kick in
almost immediately but offer less reduction overall than
regulation. They are offering to reduce the charges over four
years. The reduction would apply to termination rates on both their
2G and 3G networks.

Telecom is offering to pass on the wholesale reduction 100 per
cent to its retail charges for a landline to mobile call. Telecom's
standard charge for a home phone call to a mobile is 71 NZ cents
(64 Australian cents) a minute.

Mr Webb has told the Government the mobile termination rates
should almost halve to 15 NZ cents a minute from 27c. But the
regulatory process would take up to 18 months because Telecom and
Vodafone have locked-in mobile termination contracts for that
time.

Mr Cunliffe has also asked Mr Webb to reconsider his
recommendation that regulation apply only to the slower
second-generation networks and not to third generation. He asked
the commission to look again at how best to ensure consumers
benefit from reduced wholesale charges.

He was in no doubt the commission's analysis on the cost being
too high was correct. "Quite clearly consumers are paying too much
for mobile phone calls at the moment, which are among the highest
in the OECD."

Mr Cunliffe wanted the commission to report to the Government by
the end of the year on whether the commercial deals should be
accepted or regulation be imposed.

Telecom's general manager of industry and regulatory relations
Bruce Parkes said Telecom's offering would be better for consumers.
It would start more quickly and apply to both 2G and 3G networks.
Telecom would drop its termination rates by 1c to 2c a minute next
month to companies that had existing contracts with it at higher
rates.

Vodafone declined to comment yesterday. It stands to lose
profits of up to $NZ200 million from regulation of termination
rates.

TelstraClear general manager regulatory affairs Grant Forsyth
said TelstraClear did not want the commercial deals to be an
alternative to regulation. Government should still give the
commission power to regulate termination rates as a backstop and
Vodafone and Telecom could still offer the voluntary deals. There
was no need to regulate retail prices.